The Hindu Business Line : KKR of US to invest $515 m in Indian IT sector

The US-based private equity fund Kohlberg Kravis Roberts & Company (KKR) would be pumping in $515 million (approximately Rs 2,300 crore) in India's information technology sector.

According to the proposal submitted to the Foreign Investment Promotion Board (FIPB), the company, through its subsidiaries, would be engaged in the business of information technology and will also acquire majority stake in Flextronics Software Systems Ltd (FSSL), which was its first acquisition in India announced earlier this year. The funds will flow in through a complex route through a Cayman Islands-based company via Mauritius.

The plan has been designed in this manner to make it a tax optimal structure from the holding company's perspective, informed sources said.

The proposal has been approved by the FIPB and would be placed before the Cabinet Committee on Economic Affairs (CCEA) for a final clearance, sources said.

According to the proposal, Cayman Islands-based company, Software Development Systems (SDS), is an investment holding and management company and is an indirect subsidiary of Software Development Group (SDG). SDS is in the process of incorporating SDC Mauritius as its wholly owned subsidiary (WOS) and proposes to invest directly by itself and/or through its Mauritius-based WOS to acquire shares in Kappa Investments Ltd (KIL), which is under incorporation, sources said. Kappa Investments will be engaged in the information technology business and would also function as the holding company for FSSL.

Approval has been sought for investing up to $515 million for acquiring 100 per cent share capital of Kappa Investments by these two foreign firms. The share capital shall consist of $200 million in equity with a face value of Rs 10 each. The remaining $315 million would be in the form of redeemable optionally convertible preference shares with a non-cumulative coupon rate of 0.1 per cent per annum.